interim management statement 1q 2014 - hsbc · interim management statement – 1q 2014 (continued)...

H S B C H O L D I N G S P L C

Interim Management Statement – 1Q 2014

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7 May 2014

HSBC Holdings plc – Interim Management Statement

HSBC Holdings plc (‘HSBC’) will be conducting a trading update conference call with analysts and

investors today to coincide with the release of this Interim Management Statement. The trading

update call will take place at 10.00am BST, and details of how to participate in the call and the live

audio webcast can be found below and at Investor Relations on www.hsbc.com.

Conference call details

Date: Wednesday, 7 May 2014 Time: 5.00am EDT 10.00am BST 5.00pm HKT Audio webcast: Please follow this link for the webcast: http://www.hsbc.com/1/2/investor-relations Speakers: Stuart Gulliver, Group Chief Executive Iain Mackay, Group Finance Director Conference details for investors and analysts: Passcode: HSBC Toll Toll free UK/International +44 (0) 1452 584 928 UK 0800 279 5983 USA +1 917 503 9902 USA 1866 629 0054 Hong Kong +852 3077 4624 Hong Kong 800 933 234 Replay conference call details (available until 6 June 2014): Passcode: 23525015# Toll Toll free International +44 (0) 1452 550 000 UK +44 (0) 8443 386 600 UK 0800 953 1533 USA +1 631 510 7499 USA 1866 247 4222 Hong Kong +852 5808 5558 Hong Kong 800 901 393 Investor Relations Media Relations

Guy Lewis Heidi Ashley Tel: +44 (0) 20 7992 1938 Tel: +44 (0) 20 7992 2045 Hugh Pye Gareth Hewett Tel: +852 2822 4908 Tel: +852 2822 4929


Interim Management Statement – 1Q 2014 (continued)

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Table of contents

Highlights ........................................................................ 3 Summary consolidated balance sheet .............................. 13

Group Chief Executive’s comments ................................ 5 Capital ............................................................................. 14

Geographical regions ....................................................... 6 Risk-weighted assets ....................................................... 15

Implementation of CRD IV ............................................. 6 Profit/(loss) before tax by global business and

Underlying performance .................................................. 6 geographical region ..................................................... 18

Financial performance commentary ................................. 7 Summary information – global businesses ...................... 19

Trading conditions since 31 March 2014 and outlook ..... 10 Summary information – geographical regions ................. 24

Notes ................................................................................ 11 Appendix – selected information ..................................... 29

Cautionary statement regarding forward-looking Loans and advances to customers by industry sector

statements .................................................................... 11 and by geographical region .................................... 29

Summary consolidated income statement ........................ 12

Terms and Abbreviations

1Q13 / 1Q14 First quarter of 2013 / 2014 4Q13 Fourth quarter of 2013 CET1 Common equity tier 1 CMB Commercial Banking CML Consumer and Mortgage Lending in the US CRD IV Capital Requirements Directive IV CRS Card and Retail Services DVA Debit valuation adjustment FTEs Full-time equivalent staff FX Foreign exchange GB&M Global Banking and Markets GMB Group Management Board GPB Global Private Banking HTS HSBC Technology and Services IAS International Accounting Standard Industrial Bank Industrial Bank Co., Limited Legacy Credit A portfolio of assets comprising Solitaire Funding Limited, securities investment conduits, asset-backed

securities trading and correlation portfolios and derivative transactions entered into with monoline insurers LGD Loss given default LICs Loan impairment and other credit risk provisions NCOA Non-credit obligation assets Own credit spread Fair value movements on our long-term debt designated at fair value resulting from changes in credit spread PBT Profit before tax Ping An Ping An Insurance (Group) Company of China, Ltd PPI Payment Protection Insurance PRA Prudential Regulation Authority Principal RBWM RBWM excluding the effects of the US run-off portfolio and the disposal of the CRS business in the US RBWM Retail Banking and Wealth Management RoRWA Pre-tax RoRWA is calculated using average RWAs on a Basel 2.5 basis for all periods up to and including

31 December 2013 and on a CRD IV end point basis from 1 January 2014 RWAs Risk-weighted assets US$m / US$bn United States dollar millions/billions

Note to editors

HSBC Holdings plc

HSBC Holdings plc, the parent company of the HSBC Group, is headquartered in London. The Group serves customers worldwide from over 6,300 offices in over 75 countries and territories in Europe, Asia, North and Latin America, and the Middle East and North Africa. With assets of US$2,758bn at 31 March 2014, HSBC is one of the world’s largest banking and financial services organisations.



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Highlights

Reported profit before tax (‘PBT’) down 20% in the first quarter of 2014 (‘1Q14’) at US$6,785m compared with US$8,434m in the same period in 2013 (‘1Q13’).

Underlying PBT was down US$968m or 13% in 1Q14 at US$6,621m, compared with US$7,589m in 1Q13, primarily reflecting the reduced impact of significant items (US$741m net reduction in PBT between 1Q13 and 1Q14, comprising lower revenue items of US$1,076m and lower operating expense items of US$335m).

Earnings per share and dividends per ordinary share for the first quarter of 2014 were US$0.27 and US$0.10, respectively, compared with US$0.34 and US$0.10 for the equivalent period in 2013.

Return on average ordinary shareholders’ equity (annualised) was 3.2% lower at 11.7%, compared with 14.9% for the equivalent period in 2013.

Lower 1Q14 revenue – 1Q14 underlying revenue was US$15,709m, down 8% from US$17,135m in the same period in 2013 mainly reflecting the reduced impact from significant items of US$1,076m. Excluding these items, revenue was lower by US$350m or 2%, driven by Retail Banking and Wealth Management and Global Banking and Markets, partly offset by growth in Commercial Banking.

Further progress made on executing against strategy with market share gains in several product categories in Global Banking and Markets including equity and debt capital markets, advisory and lending. We also achieved positive net new money in targeted areas of growth in Global Private Banking.

Lower 1Q14 underlying operating expenses – 1Q14 operating expenses were US$8,843m, down 2% from US$9,014m in the same period in 2013. Excluding significant items, operating expenses increased by 2% in part reflecting increased investment in Global Standards, Risk and Compliance, and inflation, partly offset by cost saving initiatives.

Capital – at 1Q14, the CRD IV transitional basis CET1 capital ratio was 10.7%, down from 10.8% at 31 December 2013, and the end point CET1 capital ratio was 10.8%, down from 10.9%. This largely reflected increased RWAs resulting from regulatory change.

Three months ended 31 March

2014 2013 Change US$m US$m % Income statement and performance measures1 Reported profit before tax ........................................................................................ 6,785 8,434 (20) Underlying profit before tax .................................................................................... 6,621 7,589 (13) Profit attributable to ordinary shareholders of the parent company .......................... 5,069 6,211 (18) Cost efficiency ratio ................................................................................................. 55.7% 50.8% (10) Pre-tax return on average risk-weighted assets (annualised) .................................... 2.3% 3.1% (26)

At 31 March 2014

At 31 December 2013

Change from 31 December 2013 to 31 March 2014

Capital and balance sheet2 CRD IV

Common equity tier 1 ratio (Year 1 transition) .................................................... 10.7% 10.8% Common equity tier 1 ratio (end point) ............................................................... 10.8% 10.9%

Basel 2.5 Core tier 1 ratio .................................................................................................... 13.6%

US$m US$m US$m Loans and advances to customers ............................................................................ 1,009,830 992,089 17,741 Customer accounts ................................................................................................... 1,366,034 1,361,297 4,737 CRD IV risk-weighted assets ................................................................................... 1,257,672 1,214,939 42,733

1 All on a reported basis, unless otherwise stated. Underlying basis eliminates effects of foreign currency translation differences, acquisitions, disposals and changes in ownership levels of subsidiaries, associates, joint ventures and businesses, and changes in fair value (‘FV’) due to movements in credit spread on own long-term debt issued by the Group and designated at fair value. A reconciliation of reported results to underlying results is shown on page 7.

2 For details of the implementation of CRD IV, see page 6.



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Reconciliation of reported and underlying PBT

Quarter ended 31 March 2014 2013 US$m US$m Reported Revenue1 ............................................................................................................................................... 15,884 18,416 Loan impairment charges and other credit risk provisions ............................................................................ (798) (1,171) Operating expenses ............................................................................................................................... (8,852) (9,347) Profit before tax .................................................................................................................................... 6,785 8,434 Underlying adjustments to reported PBT Reported profit before tax ..................................................................................................................... 6,785 8,434

Fair value movements on own debt ................................................................................................. (148) 243 Gain on de-recognition of Industrial Bank as an associate .............................................................. – (1,089) Gain on sale of associate shareholdings in Bao Viet Holdings ........................................................ – (104) Loss on sale of Household Insurance Group’s insurance manufacturing business .......................... – 99 Gain on disposal of Colombia operations ........................................................................................ (18) – Operating results of disposals, acquisitions and dilutions ................................................................ 2 73 Currency translation ........................................................................................................................ – (67)

Underlying profit before tax ................................................................................................................. 6,621 7,589 Underlying Revenue1 ............................................................................................................................................... 15,709 17,135 Loan impairment charges and other credit risk provisions ............................................................................ (796) (1,072) Operating expenses ............................................................................................................................... (8,843) (9,014) Profit before tax .................................................................................................................................... 6,621 7,589

Significant items (on a reported basis)

Quarter ended 31 March 2014 2013 US$m US$m Included in underlying profit before tax are:

Revenue1 Net gain on completion of Ping An disposal2 ............................................................................... – 553

Write-off of allocated goodwill relating to GPB Monaco business3 ............................................. – (279) FX gains relating to the sterling debt issued by HSBC Holdings .................................................. – 442 Debit valuation adjustment on derivative contracts ...................................................................... 31 472 Fair value movement on non-qualifying hedges ........................................................................... (142) 84 Loss on early termination of cash flow hedges in the US run-off portfolio .................................. – (199) Loss on sale of an HFC Bank UK secured loan portfolio ............................................................. – (138) Loss on sale of several tranches of real estate secured accounts in the US ................................... (30) –

Total ............................................................................................................................................. (141) 935 Operating costs

UK customer redress programmes ................................................................................................ 83 164 Of which

PPI ........................................................................................................................................... 83 113 Restructuring and other related costs ............................................................................................ 40 75 Regulatory investigation provisions in GPB ................................................................................. – 119 US customer remediation provision relating to CRS .................................................................... – 100

Total ............................................................................................................................................. 123 458

1 Net operating income before loan impairment charges, also referred to as ‘revenue’. 2 The gain of US$553m represents the net impact of the disposal of available-for-sale investments in Ping An offset by adverse changes in

fair value of the contingent forward sale contract to the point of delivery of the shares. 3 In 1Q13, the private banking operations of HSBC Private Bank Holdings (Suisse) SA in Monaco were classified as held for sale. At this

time a loss on reclassification to held for sale was recognised following a write down in the value of goodwill allocated to the operation. Following a strategic review we decided to retain the operation and the assets and liabilities of the business were reclassified to the relevant balance sheet categories; however, the loss on classification was not reversed.



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Group Chief Executive, Stuart Gulliver, commented:

"In the first quarter we maintained control of costs and further demonstrated our capital resilience. Whilst revenue

was lower than the previous year's first quarter, which benefited from a number of specific items, we have seen

progress in revenue over the trailing quarters. Loan impairment charges fell, reflecting the changes to the portfolio

since 2011. Our return on equity was 11.7%.

"Global Banking and Markets had a relatively good performance and we grew our market share in several product

categories. Commercial Banking saw revenue growth but, in our Principal Retail Banking and Wealth

Management business, revenues were impacted by changes in incentive plans and product pricing."



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Geographical regions

Hong Kong and Rest of Asia-Pacific are no longer regarded as separate reportable operating segments, having considered the geographical financial information presented to the GMB. From 1 January 2014, they have been replaced by a new operating segment ‘Asia’, which better aligns with internal management information used for evaluation when making business decisions and resource allocations. Comparative data have been re-presented to reflect this change.

Implementation of CRD IV

On 1 January 2014, CRD IV came into force and capital and RWAs at 31 March 2014 are calculated and presented on this basis. Prior to this date, capital and RWAs were calculated and presented on a Basel 2.5 basis. In addition, capital and RWAs at 31 December 2013 were also estimated based on the Group’s interpretation of final CRD IV legislation and final rules issued by the PRA, details of which can be found in the basis of preparation on page 324 of the Annual Report and Accounts 2013.

Underlying performance

Underlying performance:

adjusts for the period-on-period effects of foreign currency translation;

eliminates the fair value movements on our long-term debt attributable to own credit spread where the net result of such movements will be zero upon maturity of the debt. This does not include fair value changes due to own credit risk in respect of trading liabilities or derivative liabilities; and

adjusts for acquisitions, disposals and changes of ownership levels of subsidiaries, associates, joint ventures and businesses.

For acquisitions, disposals and changes of ownership levels of subsidiaries, associates, joint ventures and businesses, we eliminate the gain or loss on disposal or dilution and any associated gain or loss on reclassification or impairment recognised in the period incurred, and remove the operating profit or loss of the acquired, disposed of or diluted subsidiaries, associates, joint ventures and businesses from all the periods presented so we can view results on a like-for-like basis. Disposal of investments other than those included in the above definition do not lead to underlying adjustments.

Reconciliation of reported and underlying revenue

Quarter ended

31 Mar 2014

31 Mar 2013 Change

31 Dec 2013

Change

US$m US$m % US$m % Reported revenue ......................................................... 15,884 18,416 (14) 15,195 5 Currency translation adjustment1 ................................. (294) (107) Own credit spread ........................................................ (148) 243 652 Acquisitions, disposals and dilutions .............................. (27) (1,230) (1,120) Underlying revenue ..................................................... 15,709 17,135 (8) 14,620 7 Reconciliation of reported and underlying LICs

Quarter ended

31 Mar 2014

31 Mar 2013 Change

31 Dec 2013

Change

US$m US$m % US$m % Reported LICs ............................................................. (798) (1,171) 32 (1,140) 30 Currency translation adjustment1 ................................. 75 29 Acquisitions, disposals and dilutions .............................. 2 24 6 Underlying LICs .......................................................... (796) (1,072) 26 (1,105) 28



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Reconciliation of reported and underlying operating expenses

Quarter ended

31 Mar 2014

31 Mar 2013 Change

31 Dec 2013

Change

US$m US$m % US$m % Reported operating expenses ....................................... (8,852) (9,347) 5 (10,573) 16 Currency translation adjustment1 ................................. 141 44 Acquisitions, disposals and dilutions .............................. 9 192 36 Underlying operating expenses .................................... (8,843) (9,014) 2 (10,493) 16 Underlying cost efficiency ratio ................................... 56.3% 52.6% 71.8%

Reconciliation of reported and underlying profit before tax

Quarter ended

31 Mar 2014

31 Mar 2013 Change

31 Dec 2013

Change

US$m US$m % US$m % Reported profit before tax ............................................ 6,785 8,434 (20) 3,964 71 Currency translation adjustment1 ................................. (67) (35) Own credit spread ........................................................ (148) 243 652 Acquisitions, disposals and dilutions .............................. (16) (1,021) (1,081) Underlying profit before tax ........................................ 6,621 7,589 (13) 3,500 89

1 ‘Currency translation adjustment’ is the effect of translating the results of subsidiaries and associates for the previous period at the average rates of exchange applicable in the current period.

Financial performance commentary

1Q14 compared with 1Q13

Reported profit before tax of US$6.8bn in 1Q14 was US$1.6bn or 20% lower than in 1Q13, primarily reflecting lower gains (net of losses) from disposals and reclassifications. Notably, our results in 1Q13 included a US$1.1bn accounting gain arising from the reclassification of Industrial Bank as a financial investment following its issue of additional share capital to third parties. This was partly offset in 1Q14 by favourable fair value movements of US$0.1bn on our own debt designated at fair value resulting from changes in credit spreads compared with adverse movements of US$0.2bn in 1Q13.

On an underlying basis, profit before tax was US$1.0bn or 13% lower than in 1Q13. This was primarily driven by lower revenue, partly offset by lower LICs and operating expenses.

Reported revenue was US$15.9bn in 1Q14, US$2.5bn lower than in 1Q13, in part reflecting lower gains (net of losses) from disposals and reclassifications. On an underlying basis, revenue of US$15.7bn was US$1.4bn or 8% lower driven by a number of significant items which were recorded in 1Q13, as follows:

a net gain on completion of the Ping An disposal of US$553m; and

foreign exchange gains on sterling debt issued by HSBC Holdings of US$442m.

This was partly offset by:

a loss of US$279m recognised following the write-off of allocated goodwill relating to our GPB business in Monaco;

a loss of US$199m on early termination of cash flow hedges in the US run-off portfolio in RBWM; and

a loss on the sale of an HFC Bank UK secured loan portfolio of US$138m.

In addition, 1Q14 revenue included:

a favourable DVA of US$31m (compared with US$472m in 1Q13) in GB&M on derivative contracts;

adverse fair value movements on non-qualifying hedges of US$142m compared with favourable movements of US$84m in 1Q13; and

a loss of US$30m on sales of several tranches of real estate secured accounts in the US run-off portfolio in RBWM.

Excluding these items, revenue was US$0.4bn lower:

in RBWM, revenue was US$0.3bn lower reflecting reduced net interest income following the sale of the non-real estate



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portfolio in 2013 and lower average balances in the US run-off portfolio. In our Principal RBWM business, revenue decreased by US$0.1bn, mainly reflecting the run-off of our Canadian consumer finance business, lower mortgage fees in the US and lower overdrafts and investment fees in Europe. These factors were partly offset by higher revenue from savings and deposits, mainly in Europe and Asia;

in GB&M, total revenue was US$0.2bn or 4% lower, although this included higher revenue in Legacy Credit of US$0.1bn as we actively managed the portfolio. The reduction in revenue was driven by a decrease of US$0.2bn in Balance Sheet Management, as 1Q13 included higher gains from the re-positioning of the portfolio for risk management purposes. Although market conditions were challenging, GB&M increased market share in several product categories including equity and debt capital markets, advisory and lending. However, overall revenue in Capital Financing decreased as volume growth across the business was more than offset by spread and fee compression. Revenue in Rates, Foreign Exchange and Credit also fell as these businesses were affected by subdued activity levels. By contrast, revenue grew in our Equities business as client flows increased; and

in GPB, revenue was US$0.1bn lower, reflecting a managed reduction in client assets as we continued to reposition the business, which led to a reduction in fee and trading income. We attracted positive net new money in areas that we have targeted for growth, including our home and priority markets and the high net worth client segment.

These factors were partly offset by:

CMB, where revenue rose by US$0.2bn. This was primarily due to higher net interest income, mainly in Asia from average balance sheet growth and in the UK from a rise in deposit balances and wider lending spreads. In addition, revenue grew from increased collaboration with GB&M, notably in Asia, and from higher term lending fees in the UK.

LICs of US$0.8bn were US$0.4bn lower than in 1Q13 on a reported basis, and US$0.3bn lower

on an underlying basis, primarily from reductions in North America and Europe.

In North America, the decrease of US$0.3bn reflected reduced balances and lower levels of new impaired loans in the US run-off portfolio, together with improvements in US housing market conditions, although the rate of improvement was lower than in 2013.

In Europe, the decrease of US$0.1bn was mainly driven by lower specific impairments in CMB in the UK.

Reported operating expenses in 1Q14 of US$8.9bn were 5% lower than in 1Q13. On an underlying basis, operating expenses fell by US$0.2bn, reflecting the effect of significant items:

the non-recurrence of regulatory investigation provisions in GPB recorded in 1Q13 of US$119m;

a customer remediation provision connected to our former CRS business recorded in 1Q13 of US$100m;

lower UK customer redress programme charges of US$83m compared with US$164m in 1Q13. Charges for the period included estimated redress for possible mis-selling in previous years in respect of PPI; and

lower restructuring and other related costs of US$35m.

Excluding these items, operating expenses were 2% higher than in 1Q13 reflecting increased investment in Global Standards, Risk and Compliance and wage inflation, partly offset by cost saving initiatives.

Our cost efficiency ratio increased by 4.9 percentage points on a reported basis to 55.7% and by 3.7 percentage points to 56.3% on an underlying basis reflecting lower revenue.

The number of FTEs at the end of the quarter was 255,200, an increase of 1,100 on 31 December 2013, reflecting continued investment in Global Standards, Compliance and business growth initiatives, primarily in RBWM and CMB, partly offset by sustainable savings initiatives and the disposal of our operations in Colombia.

The effective tax rate of 18.8% was lower than the UK corporation tax rate of 21.5%. This reflected the recurring benefits from tax exempt



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income from government bonds held in a number of Group entities and the recognition of the Group’s share of post-tax profits of associates and joint ventures within the Group’s pre-tax income. The lower effective tax rate in 1Q13 of 15.7% was driven by the benefits arising from the non-taxable gain on profits associated with the reclassification of Industrial Bank as a financial investment and the Ping An sale.

On 7 May 2014, the Board announced a first interim dividend for 2014 of US$0.10 per ordinary share.

1Q14 compared with 4Q13

Reported profit before tax was US$2.8bn or 71% higher than in 4Q13, despite lower gains (net of losses) from disposals of US$18m compared with US$1.0bn in 4Q13 which primarily arose from the sale of our Panama operations. 1Q14 included favourable fair value movements of US$0.1bn on own credit spread compared with adverse movements of US$0.7bn in 4Q13.

On an underlying basis, profit before tax was US$3.1bn or 89% higher than in 4Q13, reflecting higher revenue and lower LICs and operating expenses.

Reported revenue of US$15.9bn in 1Q14 was 5% higher than in 4Q13. On an underlying basis, revenue was US$1.1bn or 7% higher, driven by GB&M. This was notably in Rates, Foreign Exchange and Credit following particularly muted customer activity in 4Q13 compared with 1Q14.

LICs were US$0.3bn lower than in 4Q13 on both a reported and underlying basis. LICs fell in the majority of our regions, notably by US$0.2bn in Latin America reflecting lower specific impairments in CMB in Mexico relating to homebuilders due to a change in public housing policy in 2013, and in Brazil across a number of corporate exposures. In North America, LICs fell by US$0.1bn, mainly driven by lower collective charges in the US, in part reflecting the CML portfolio run-off.

Operating expenses for 1Q14 were US$1.7bn lower than in 4Q13 on a reported basis and US$1.6bn lower on an underlying basis. This primarily reflected a number of significant items including the bank levy of US$0.9bn recorded in 4Q13, lower UK customer redress charges of US$0.3bn and a decrease in restructuring and

related costs. The remaining operating expenses were US$0.3bn lower, primarily reflecting incremental cost saving initiatives.

Balance sheet commentary

Reported loans and advances to customers increased by US$17.7bn in the quarter. Excluding FX movements of US$2.2bn, the growth was driven by GB&M and CMB customers in Asia, relating to term lending. In addition, there was growth in Europe in GB&M from Capital Financing and corporate overdraft balances that did not meet the criteria for netting, partly offset by a reduction in credit card balances in RBWM and a fall in CMB lending.

Reported customer accounts balances were broadly unchanged during 1Q14, with growth in Europe offset by a decrease in North America. The increase in Europe was driven by growth in balances in GB&M that did not meet the criteria for netting and an increase in RBWM. In North America, the fall in balances primarily reflected re-pricing.

Other significant balance sheet movements in the quarter included a rise in trading assets and liabilities, mainly in Europe and North America. This reflected an increase in customer activity and a resultant increase in settlement account balances.

Capital and risk-weighted assets

On 1 January 2014, CRD IV came into effect, implementing the Basel III framework within the European Union.

At 1Q14, the CRD IV transitional basis CET1 capital ratio reduced to 10.7%, from 10.8% at 31 December 2013. Similarly the end-point CET1 capital ratio reduced to 10.8% from 10.9%. This largely reflected increased RWAs resulting from regulatory change.

Internal capital generation contributed US$4.5bn to CRD IV end point CET 1 capital, being profits attributable to shareholders of the parent company after regulatory adjustment for own credit spread and net of the first interim dividend. The dividend is net of planned scrip, and we have benefited from a higher fourth interim dividend scrip take-up.

On 1 January 2014, the move from the historical regulatory regime to a CRD IV transitional basis increased RWAs by US$122.2bn. This movement mainly consisted of credit valuation adjustment, asset value correlation, amounts in aggregate below



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the capital threshold risk-weighted at 250% and selected securitisation positions which moved from capital deductions to RWAs.

Selected portfolios with low default history were subject to PRA LGD floors, with an impact of US$17.3bn in RWAs; this is reported under methodology and policy changes. In addition, the PRA required a floor to be applied to the UK corporate LGD model, resulting in an increase in RWAs of US$17.1bn, as reported under model updates.

Business growth in CMB and GB&M in Asia and Europe from higher term lending to corporate customers increased RWAs by US$7.3bn, while additional increases occurred for corporate and sovereign exposures in Asia resulting from adverse movements in customer credit standing with an RWA impact of US$2.3bn.

Internal ratings-based (‘IRB’) RWA reductions of US$10.1bn from internal updates related to immaterial portfolios moving to the Standardised approach, with a reduction in IRB RWAs of US$4.8bn and methodology changes associated with trade finance products which accounted for a reduction in RWAs of US$4.6bn. Immaterial portfolios moving to the Standardised approach increased Standardised RWAs by US$6.0bn.

US retail run-off portfolio RWAs reduced by US$8.2bn as a result of a combination of factors, including the implementation of new risk models for the mortgage portfolios and favourable shifts in portfolio quality, as lower quality exposures continue to run off.

Net interest margin

Net interest margin was lower than in 1Q13 as a result of lower yields on customer lending, primarily in North America and Latin America. In North America this was driven by the effect of the disposals of the CML non-real estate loan portfolio and select tranches of CML first lien mortgages in the US in 2013. Both North America and Latin America were also affected by a change in the composition of their lending portfolios as they

focused on growing secured, lower yielding balances, for both corporate and Premier customers. Yields on customer lending also fell in Europe and Asia, although to a lesser extent. However, yields on our surplus liquidity increased, notably in Asia, in line with market rate rises in mainland China and active management of our portfolios.

Cost of funds on customer accounts fell, albeit to a lesser extent than yields on customer lending, across most regions. In addition, the cost of debt issued by the Group decreased, primarily in Europe and in North America, as higher cost funding matured. The effects of these reductions were partially offset by an increase in the cost of funds in Latin America from rising interest rates in Brazil and from the continued change in the funding base, substituting wholesale deposits for medium-term notes.

In addition, the net interest margin reduced due to the significant increase in reverse repurchase agreements and repurchase agreements arising from the change in 4Q13 in the way that GB&M manage these activities. This had the effect of increasing average interest-earning assets, without a correspondingly large increase in net interest income, as these agreements are typically lower-yielding and have a lower cost of funds than the rest of the portfolio.

The decline in net interest margin from 4Q13 was lower than the reduction experienced from 1Q13 and was driven by North America and Latin America. It similarly reflected the change in the composition of lending portfolios, both as a result of disposals of selected tranches of CML first lien mortgages in the US during 4Q13 and the continued shift towards secured, lower-yielding balances in both regions, as noted above. Additionally, Latin America was affected by a significant rise in its cost of funds, as interest rates rose in Brazil.

Trading conditions since 31 March 2014 and outlook

We continued to experience muted customer activity in April.



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Notes

Income statement comparisons, unless stated otherwise, are between the quarter ended 31 March 2014 and the quarter ended 31 March 2013. Balance sheet comparisons, unless otherwise stated, are between balances at 31 March 2014 and the corresponding balances at 31 December 2013.

The financial information on which this Interim Management Statement is based, and the data set out in the appendix to this statement, are unaudited and have been prepared in accordance with HSBC’s significant accounting policies as described in the Annual Report and Accounts 2013, with the exception of the adoption of the following new or revised standards: On 1 January 2014 HSBC adopted amendments to IAS 32 ‘Offsetting Financial assets and Financial Liabilities’ which clarified the requirements for offsetting financial instruments and addressed inconsistencies in current market practice when applying the offsetting criteria in IAS 32 ‘Financial Instruments: Presentation’. The amendments have been applied retrospectively and have not had a material effect on HSBC’s financial statements.

The Board has adopted a policy of paying quarterly interim dividends on the ordinary shares. Under this policy, it is intended to have a pattern of three equal interim dividends with a variable fourth interim dividend. Dividends are declared in US dollars and, at the election of the shareholder, paid in cash in one of, or in a combination of, US dollars, sterling and Hong Kong dollars or, subject to the Board’s determination that a scrip dividend is to be offered in respect of that dividend, may be satisfied in whole or in part by the issue of new shares in lieu of a cash dividend.

Interim Report 2014 announcement date .................................................................................................................. 4 August 2014 Shares quoted ex-dividend in London, Hong Kong, Paris and Bermuda .................................................................. 20 August 2014 ADSs quoted ex-dividend in New York ................................................................................................................... 20 August 2014 Dividend record date in Hong Kong ......................................................................................................................... 21 August 2014 Dividend record date in London, New York, Paris and Bermuda ............................................................................. 22 August 2014 Dividend payment date ............................................................................................................................................. 9 October 2014

Cautionary statement regarding forward-looking statements The Interim Management Statement contains certain forward-looking statements with respect to HSBC’s financial condition, results of operations, capital position and business.

Statements that are not historical facts, including statements about HSBC’s beliefs and expectations, are forward-looking statements. Words such as ‘expects’, ‘anticipates’, ‘intends’, ‘plans’, ‘believes’, ‘seeks’, ‘estimates’, ‘potential’ and ‘reasonably possible’, variations of these words and similar expressions are intended to identify forward-looking statements. These statements are based on current plans, estimates and projections, and therefore undue reliance should not be placed on them. Forward-looking statements speak only as of the date they are made. HSBC makes no commitment to revise or update any forward-looking statements to reflect events or circumstances occurring or existing after the date of any forward-looking statements.

Written and/or oral forward-looking statements may also be made in the periodic reports to the US Securities and Exchange Commission, summary financial statements to shareholders, proxy statements, offering circulars and prospectuses, press releases and other written materials, and in oral statements made by HSBC’s Directors, officers or employees to third parties, including financial analysts.

Forward-looking statements involve inherent risks and uncertainties. Readers are cautioned that a number of factors could cause actual results to differ, in some instances materially, from those anticipated or implied in any forward-looking statement. These include, but are not limited to:

changes in general economic conditions in the markets in which we operate, such as continuing or deepening recessions and fluctuations in employment beyond those factored into consensus forecasts; changes in foreign exchange rates and interest rates; volatility in equity markets; lack of liquidity in wholesale funding markets; illiquidity and downward price pressure in national real estate markets; adverse changes in central banks’ policies with respect to the provision of liquidity support to financial markets; heightened market concerns over sovereign creditworthiness in over-indebted countries; adverse changes in the funding status of public or private

defined benefit pensions; and consumer perception as to the continuing availability of credit and price competition in the market segments we serve;

changes in government policy and regulation, including the monetary, interest rate and other policies of central banks and other regulatory authorities; initiatives to change the size, scope of activities and interconnectedness of financial institutions in connection with the implementation of stricter regulation of financial institutions in key markets worldwide; revised capital and liquidity benchmarks which could serve to deleverage bank balance sheets and lower returns available from the current business model and portfolio mix; imposition of levies or taxes designed to change business mix and risk appetite; the practices, pricing or responsibilities of financial institutions serving their consumer markets; expropriation, nationalisation, confiscation of assets and changes in legislation relating to foreign ownership; changes in bankruptcy legislation in the principal markets in which we operate and the consequences thereof; general changes in government policy that may significantly influence investor decisions; extraordinary government actions as a result of current market turmoil; other unfavourable political or diplomatic developments producing social instability or legal uncertainty which in turn may affect demand for our products and services; the costs, effects and outcomes of product regulatory reviews, actions or litigation, including any additional compliance requirements; and the effects of competition in the markets where we operate including increased competition from non-bank financial services companies, including securities firms; and

factors specific to HSBC, including discretionary risk-weighted asset growth and our success in adequately identifying the risks we face, such as the incidence of loan losses or delinquency, and managing those risks (through account management, hedging and other techniques). Effective risk management depends on, among other things, our ability through stress testing and other techniques to prepare for events that cannot be captured by the statistical models it uses; and our success in addressing operational, legal and regulatory, and litigation challenges, notably compliance with the Deferred Prosecution Agreements with US authorities.



12

Summary consolidated income statement

Quarter ended 31 Mar

2014 31 Dec 2013

30 Sep 2013

30 Jun 2013

31 Mar 2013

US$m US$m US$m US$m US$m Net interest income ................................................................... 8,721 9,006 8,714 8,851 8,968 Net fee income .......................................................................... 4,046 3,993 4,037 4,159 4,245 Net trading income ................................................................... 2,280 1,045 1,283 2,519 3,843 Changes in fair value of long-term debt issued and related

derivatives ............................................................................ 203 (275) 466 38 (1,457) Net income/(expense) from other financial instruments

designated at fair value ......................................................... 305 793 981 (331) 553 Net income/(expense) from financial instruments designated

at fair value ........................................................................... 508 518 1,447 (293) (904) Gains less losses from financial investments ............................ 184 136 20 246 1,610 Dividend income ....................................................................... 24 44 171 73 34 Net earned insurance premiums ................................................ 3,136 2,665 3,049 3,054 3,172 Other operating income/(expense) ............................................ 328 1,213 473 (55) 1,001 Total operating income ........................................................... 19,227 18,620 19,194 18,554 21,969 Net insurance claims incurred and movement in liabilities to

policyholders ........................................................................ (3,343) (3,425) (4,116) (2,598) (3,553) Net operating income before loan impairment charges

and other credit risk provisions ......................................... 15,884 15,195 15,078 15,956 18,416 Loan impairment charges and other credit risk provisions ........ (798) (1,140) (1,593) (1,945) (1,171) Net operating income .............................................................. 15,086 14,055 13,485 14,011 17,245 Total operating expenses ........................................................... (8,852) (10,573) (9,584) (9,052) (9,347) Operating profit ...................................................................... 6,234 3,482 3,901 4,959 7,898

Share of profit in associates and joint ventures ......................... 551 482 629 678 536 Profit before tax ...................................................................... 6,785 3,964 4,530 5,637 8,434 Tax expense .............................................................................. (1,275) (995) (1,045) (1,401) (1,324) Profit after tax ......................................................................... 5,510 2,969 3,485 4,236 7,110

Profit attributable to shareholders of the parent company ......... 5,211 2,720 3,200 3,931 6,353 Profit attributable to non-controlling interests ........................... 299 249 285 305 757 US$ US$ US$ US$ US$ Basic earnings per ordinary share ............................................. 0.27 0.14 0.16 0.20 0.34 Diluted earnings per ordinary share .......................................... 0.27 0.14 0.16 0.20 0.33 Dividend per ordinary share (in respect of the period) .............. 0.10 0.19 0.10 0.10 0.10 % % % % % Return on average ordinary shareholders’ equity (annualised) . 11.7 5.9 7.2 9.1 14.9 Pre-tax RoRWA (annualised) ................................................... 2.3 1.4 1.6 2.1 3.1 Cost efficiency ratio .................................................................. 55.7 69.6 63.6 56.7 50.8



13

Summary consolidated balance sheet

At 31 March 2014

At 31 December 2013

At 30 June 2013

US$m US$m US$m ASSETS Cash and balances at central banks .......................................................................... 165,838 166,599 148,285 Trading assets .......................................................................................................... 355,193 303,192 432,601 Financial assets designated at fair value .................................................................. 39,874 38,430 35,318 Derivatives ............................................................................................................... 270,353 282,265 299,213 Reverse repurchase agreements – non-trading ......................................................... 205,332 179,690 88,400 Loans and advances to banks ................................................................................... 129,530 120,046 127,810 Loans and advances to customers ............................................................................ 1,009,830 992,089 938,294 Financial investments .............................................................................................. 418,178 425,925 404,214 Assets held for sale .................................................................................................. 3,936 4,050 20,377 Other assets .............................................................................................................. 160,383 159,032 150,804 Total assets .............................................................................................................. 2,758,447 2,671,318 2,645,316 LIABILITIES AND EQUITY Liabilities Repurchase agreements – non-trading ..................................................................... 218,379 164,220 66,591 Deposits by banks .................................................................................................... 89,492 86,507 92,709 Customer accounts ................................................................................................... 1,366,034 1,361,297 1,266,905 Trading liabilities ..................................................................................................... 241,455 207,025 342,432 Financial liabilities designated at fair value ............................................................. 87,767 89,084 84,254 Derivatives ............................................................................................................... 260,991 274,284 293,669 Debt securities in issue ............................................................................................ 102,395 104,080 109,389 Liabilities under insurance contracts ........................................................................ 76,055 74,181 69,771 Liabilities of disposal groups held for sale ............................................................... 2,003 2,804 19,519 Other liabilities ........................................................................................................ 121,428 117,377 117,716 Total liabilities ......................................................................................................... 2,565,999 2,480,859 2,462,955 Equity Total shareholders’ equity ........................................................................................ 183,945 181,871 174,070 Non-controlling interests ......................................................................................... 8,503 8,588 8,291 Total equity .............................................................................................................. 192,448 190,459 182,361 Total equity and liabilities ....................................................................................... 2,758,447 2,671,318 2,645,316 Ratio of customer advances to customer accounts ................................................... 73.9% 72.9% 74.1%



14

Capital

Capital structure

CRD IV year 1 transition Basel 2.5

At 31 March 2014

Estimated at 31 December 2013

At 31 December 2013

At 30 June 2013

US$m US$m US$m US$m Composition of regulatory capital Shareholders’ equity per balance sheet1 ...................................... 183,945 181,871 181,871 174,070 Non-controlling interests ............................................................ 3,564 3,644 4,955 4,754 Regulatory adjustments to the accounting basis .......................... (15,839) (18,313) (7,942) (8,076) Deductions .................................................................................. (36,932) (35,969) (29,833) (29,858) Common equity/core tier 1 capital .......................................... 134,738 131,233 149,051 140,890 Other tier 1 capital before deductions ......................................... 14,552 14,573 16,110 15,790 Deductions .................................................................................. (165) (165) (7,006) (6,538) Tier 1 capital ............................................................................. 149,125 145,641 158,155 150,142 Total qualifying tier 2 capital before deductions ......................... 39,356 35,786 47,812 45,009 Total deductions other than from tier 1 capital ........................... (248) (248) (11,958) (11,701) Total regulatory capital ............................................................ 188,233 181,179 194,009 183,450

Total risk-weighted assets ........................................................ 1,257,672 1,214,939 1,092,653 1,104,764 % % % % Capital ratios Common equity tier 1 ratio ......................................................... 10.7 10.8 Core tier 1 ratio ........................................................................... 13.6 12.7 Tier 1 ratio .................................................................................. 11.9 12.0 14.5 13.6 Total capital ratio ........................................................................ 15.0 14.9 17.8 16.6

1 Includes externally verified profits for the period ended 31 March 2014.

Reconciliation of regulatory capital from Year 1 transitional basis to an estimated CRD IV end point basis

At 31 March

Estimated at 31 December

2014 2013 US$m US$m Common equity tier 1 capital on a year 1 transitional basis .................................................................. 134,738 131,233

Unrealised gains arising from revaluation of property ............................................................................ 1,273 1,281 Common equity tier 1 capital end point basis ......................................................................................... 136,011 132,514 Additional tier 1 capital on a year 1 transitional basis ........................................................................... 14,387 14,408 Grandfathered instruments:

Preference share premium ...................................................................................................................... (1,160)

(1,160) Preference share non-controlling interests .............................................................................................. (1,955) (1,955) Hybrid capital securities ......................................................................................................................... (10,727) (10,727)

Transitional provisions: Allowable non-controlling interest in AT1 ............................................................................................. (335) (366) Unconsolidated investments ................................................................................................................... 165 165

Additional tier 1 capital end point basis .................................................................................................. 375 365 Tier 2 capital on a year 1 transitional basis ............................................................................................ 39,108 35,538 Grandfathered instruments:

Perpetual subordinated debt .................................................................................................................... (2,218) (2,218) Term subordinated debt .......................................................................................................................... (21,513) (21,513)

Transitional provisions: Non-controlling interest in tier 2 capital ................................................................................................. (240) (240) Allowable non-controlling interest in tier 2 ............................................................................................ 288 345 Unconsolidated investments ................................................................................................................... (165) (165)

Tier 2 capital end point basis ................................................................................................................... 15,260 11,747



15

Capital and RWA movements by major driver – CRD IV end point basis

Common equity

tier 1 capital RWAs US$bn US$bn CRD IV end point basis at 1 January 2014 ........................................................................................... 132.5 1,214.9 Contribution to CET1 capital from profit .............................................................................................. 5.1 – First interim dividend1, net of planned scrip ......................................................................................... (1.7) – Fourth interim dividend2 scrip take-up in excess of plan ....................................................................... 1.1 – Implementation of PRA LGD floors ..................................................................................................... (0.2) 34.4 Lending growth ..................................................................................................................................... – 7.6

Other ..................................................................................................................................................... (0.8) 0.8

CRD IV end point basis at 31 March 2014 ........................................................................................... 136.0 1,257.7

1 In respect of 2014. This includes dividends declared on ordinary shares, quarterly dividends on preference shares and coupons on capital securities, classified as equity.

2 In respect of 2013.

Risk-weighted assets

RWAs by risk type

CRD IV transition and end point Basel 2.5 At At At 31 Mar 2014 31 Dec 2013 31 Dec 2013 US$bn US$bn US$bn Credit risk ................................................................................................................ 965.9 936.5 864.3 Counterparty credit risk ........................................................................................... 107.2 95.8 45.8 Market risk .............................................................................................................. 66.2 63.4 63.4 Operational risk ....................................................................................................... 118.4 119.2 119.2 1,257.7 1,214.9 1,092.7

RWAs by global businesses

CRD IV transition and

end point Basel 2.5 at 31 Mar 2014 31 Dec 2013 US$bn US$bn Retail Banking and Wealth Management .............................................................................................. 226.6 233.5 Commercial Banking ............................................................................................................................ 414.6 391.7 Global Banking and Markets ................................................................................................................ 553.5 422.3 Global Private Banking ......................................................................................................................... 23.2 21.7 Other ..................................................................................................................................................... 39.8 23.5 1,257.7 1,092.7

RWAs by geographical regions

CRD IV transition and

end point Basel 2.5 at 31 Mar 2014 31 Dec 2013 US$bn US$bn Total1 .................................................................................................................................................... 1,257.7 1,092.7 Europe .................................................................................................................................................. 401.1 300.1 Asia ...................................................................................................................................................... 475.5 430.7 Middle East and North Africa ............................................................................................................... 64.3 62.5 North America ...................................................................................................................................... 243.3 223.8 Latin America ....................................................................................................................................... 94.6 89.5

1 RWAs are non-additive across geographical regions due to market risk diversification effects within the Group.



16

Credit risk exposure – RWAs by geographical region

Europe Asia MENA North

America Latin

America Total US$bn US$bn US$bn US$bn US$bn US$bn RWAs at 31 March 2014 IRB advanced approach ................... 220.8 208.4 13.1 158.8 11.1 612.2

IRB foundation approach ................. 10.1 – 4.1 – – 14.2

Standardised approach ..................... 46.2 167.1 39.7 29.4 57.1 339.5

277.1 375.5 56.9 188.2 68.2 965.9

RWAs at 31 December 2013 IRB advanced approach ................... 157.1 182.9 11.2 161.5 8.5 521.2 IRB foundation approach ................. 9.8 – 3.8 – – 13.6 Standardised approach ..................... 44.5 165.9 40.0 22.7 56.4 329.5 211.4 348.8 55.0 184.2 64.9 864.3

Credit risk exposure – RWAs by global businesses

Retail Banking and

Wealth Management

Commercial Banking

Global Banking

and Markets

Global Private

Banking Other Total US$bn US$bn US$bn US$bn US$bn US$bn RWAs at 31March 2014 IRB advanced approach ................... 125.4 197.2 257.2 11.6 20.8 612.2 IRB foundation approach ................. – 6.5 6.4 0.1 1.2 14.2 Standardised approach ..................... 63.2 178.1 73.9 6.8 17.5 339.5 188.6 381.8 337.5 18.5 39.5 965.9 RWAs at 31 December 2013 IRB advanced approach ................... 131.0 183.2 192.8 10.4 3.8 521.2 IRB foundation approach ................. – 6.3 5.8 0.1 1.4 13.6 Standardised approach ..................... 63.7 169.3 71.6 6.9 18.0 329.5 194.7 358.8 270.2 17.4 23.2 864.3 RWA movement by geographical region by key driver – credit risk – IRB only

Europe Asia MENA North America

Latin America Total

US$bn US$bn US$bn US$bn US$bn US$bn RWAs at 1 January 2014 on Basel 2.5 basis ...... 166.9 182.9 15.0 161.5 8.5 534.8

Foreign exchange movement ............................. 2.3 0.6 – (0.9) (0.5) 1.5

Acquisitions and disposals ................................. (0.2) – – – (0.1) (0.3) Book size ........................................................... 3.1 2.5 (0.2) 0.7 0.9 7.0

Book quality ...................................................... (1.5) 2.3 0.5 (1.7) 0.3 (0.1) Model updates ................................................... 14.9 0.3 – (4.9) – 10.3

– portfolios moving onto IRB approach ........ – – – – – –

– new/updated models .................................. 14.9 0.3 – (4.9) – 10.3

Methodology and policy .................................... 45.4 19.8 1.9 4.1 2.0 73.2

– internal updates .......................................... (2.2) (5.5) – (2.4) – (10.1) – external updates – regulatory ..................... 2.2 6.7 0.2 0.7 0.1 9.9

– CRD IV impact .......................................... 37.0 5.7 0.4 4.9 0.2 48.2

– NCOA moving from STD to IRB .............. 8.4 12.9 1.3 0.9 1.7 25.2

Total RWA movement ....................................... 64.0 25.5 2.2 (2.7) 2.6 91.6

RWAs at 31 March 2014 on CRD IV basis ....... 230.9 208.4 17.2 158.8 11.1 626.4



17

Europe Asia MENA North America

Latin America Total

US$bn US$bn US$bn US$bn US$bn US$bn RWAs at 1 January 2013 on Basel 2.5 basis ...... 150.7 162.3 12.6 187.1 11.2 523.9 Foreign exchange movement ............................. (6.5) (0.4) (0.3) (0.6) 0.1 (7.7) Acquisitions and disposals ................................. (1.4) – – – – (1.4) Book size ........................................................... 3.9 4.7 0.9 (4.4) (0.3) 4.8 Book quality ...................................................... (0.4) 0.7 1.9 (2.8) 0.1 (0.5) Model updates ................................................... – – – (0.2) – (0.2)

– portfolios moving onto IRB approach ........ – – – – – – – new/updated models .................................. – – – (0.2) – (0.2)

Methodology and policy .................................... 4.7 6.4 – 11.0 – 22.1 – internal updates .......................................... 2.3 – – 0.8 – 3.1 – external updates – regulatory ..................... 2.4 6.4 – 10.2 – 19.0

Total RWA movement ....................................... 0.3 11.4 2.5 3.0 (0.1) 17.1 RWAs at 31 March 2013 on Basel 2.5 basis ...... 151.0 173.7 15.1 190.1 11.1 541.0

RWA movement by global businesses by key driver – credit risk – IRB only

Principal

RBWM

US run-off

portfolio Total

RBWM CMB GB&M GPB Other Total US$bn US$bn US$bn US$bn US$bn US$bn US$bn US$bn RWAs at 1 January 2014 on

Basel 2.5 basis ..................... 58.4 72.6 131.0 189.5 198.5 10.6 5.2 534.8 –– gggg Foreign exchange movement .... (0.1) – (0.1) 0.4 1.2 – – 1.5 Acquisitions and disposals ........ – – – – (0.3) – – (0.3) Book size .................................. 1.1 (1.3) (0.2) 4.3 3.1 (0.2) – 7.0 Book quality ............................. (1.1) (2.0) (3.1) 2.1 0.7 (0.1) 0.3 (0.1) Model updates .......................... 0.3 (4.9) (4.6) 9.2 5.4 0.3 – 10.3

– portfolios moving onto IRB approach ................. – – – – – – – –

– new/updated models ......... 0.3 (4.9) (4.6) 9.2 5.4 0.3 – 10.3 Methodology and policy ........... 2.4 – 2.4 (1.8) 55.0 1.1 16.5 73.2

– internal updates ................. (2.6) – (2.6) (5.6) (1.9) – – (10.1) – external updates –

regulatory ...................... – – – 2.7 6.5 0.5 0.2 9.9 – CRD IV impact ................. – – – (0.7) 48.6 0.2 0.1 48.2

– NCOA moving from STD to IRB .................... 5.0 – 5.0 1.8 1.8 0.4 16.2 25.2

Total RWA movement .............. 2.6 (8.2) (5.6) 14.2 65.1 1.1 16.8 91.6

RWAs at 31 March 2014 on CRD IV basis ................... 61.0 64.4 125.4 203.7 263.6 11.7 22.0 626.4

RWA movement by key driver Counterparty credit risk – IRB only

2014 2013 US$bn US$bn US$bn RWAs at 1 January .......................... 42.2 42.2 45.7 Book size ......................................... 3.4 3.4 (0.4) Book quality .................................... (0.4) (0.4) (0.5) Model updates ................................. 2.2 2.2 – Methodology and policy .................. 7.5 7.5 (0.4)

– internal updates ........................ (0.6) (0.6) (0.4) – external updates – regulatory ... 8.1 8.1 –

CRD IV impact ................................ 40.9 40.9 – Total RWA movement ..................... 53.6 53.6 (1.3) RWAs at 31 March .......................... 95.8 95.8 44.4

RWA movement by key driver Market risk – internal model based

2014 2013 US$bn US$bn US$bn RWAs at 1 January .......................... 52.2 52.2 44.5 Movement in risk levels .................. (0.5) (0.5) (6.3) Model updates ................................. – – – Methodology and policy .................. 0.5 0.5 2.3

– internal updates ....................... 0.5 0.5 – – external updates – regulatory ... – – 2.3

Total RWA movement .................... – – (4.0) RWAs at 31 March .......................... 52.2 52.2 40.5



18

Estimated leverage ratio

The table below presents our estimated leverage ratio, based on the approach prescribed by the PRA. This has been calculated consistently with the basis of preparation outlined in our Annual Report and Accounts 2013, which can be found on our website www.hsbc.com.

PRA-prescribed basis

At 31 March 2014

At 31 December 2013

US$bn US$bn Total assets per financial balance sheet ................................................................................................. 2,758 2,671 Adjustment to reverse netting of loans and deposits allowable under IFRSs ........................................ 75 93 Reversal of accounting values ............................................................................................................... (498) (482)

– derivatives ..................................................................................................................................... (270) (282) – repurchase agreement and securities finance ................................................................................. (228) (200)

Replaced with regulatory values ........................................................................................................... 387 386 – derivatives ..................................................................................................................................... 229 239 – repurchase agreement and securities finance ................................................................................. 158 147

Addition of off-balance sheet commitments and guarantees ................................................................. 400 388 Exclusion of items already deducted from the capital measure ............................................................. (30) (28) Exposure measure after regulatory adjustments ............................................................................. 3,092 3,028 Tier 1 capital under CRD IV (end point) .............................................................................................. 136 133 Estimated leverage ratio (end point) ................................................................................................. 4.4% 4.4% Tier 1 capital under CRD IV (including instruments which will be ineligible for inclusion after

Basel III transitional period has fully elapsed) .................................................................................. 151

149 Estimated leverage ratio (including instruments which will be ineligible for inclusion after

Basel III transitional period has fully elapsed) ............................................................................. 4.9% 4.9%

Profit/(loss) before tax by global business and geographical region


2014 31 Dec 2013

30 Sep 2013

30 Jun 2013

31 Mar 2013

US$m US$m US$m US$m US$m By global business Retail Banking and Wealth Management .................................. 1,712 1,797 1,585 1,700 1,567 Commercial Banking ................................................................ 2,420 2,426 1,882 1,946 2,187 Global Banking and Markets .................................................... 2,871 1,866 1,852 2,135 3,588 Global Private Banking ............................................................. 201 101 (16) 233 (125) Other ......................................................................................... (419) (2,226) (773) (377) 1,217 6,785 3,964 4,530 5,637 8,434 By geographical region Europe ...................................................................................... 1,760 (898) (45) 973 1,795 Asia ........................................................................................... 3,764 2,991 3,600 3,748 5,514 Middle East and North Africa ................................................... 502 406 379 385 524 North America .......................................................................... 449 179 376 526 140 Latin America ........................................................................... 310 1,286 220 5 461 6,785 3,964 4,530 5,637 8,434



19

Summary information – global businesses

Retail Banking and Wealth Management


2014 31 Dec 2013

30 Sep 2013

30 Jun 2013

31 Mar 2013

US$m US$m US$m US$m US$m Net operating income before loan impairment charges

and other credit risk provisions ......................................... 6,244 6,810

6,641 6,576 6,713 Loan impairment charges and other credit risk provisions ........ (604) (686) (773) (878) (890) Net operating income .............................................................. 5,640 6,124 5,868 5,698 5,823 Total operating expenses ........................................................... (4,016) (4,421) (4,376) (4,112) (4,339) Operating profit ...................................................................... 1,624 1,703 1,492 1,586 1,484

Share of profit in associates and joint ventures ......................... 88 94 93 114 83 Profit before tax ...................................................................... 1,712 1,797 1,585 1,700 1,567

Profit before tax relates to: Principal RBWM .................................................................. 1,762 1,865 1,483 1,614 1,887 US run-off portfolio1 ............................................................. (50) (68) 102 86 (320)

1 31 March 2013 includes the loss on sale and results of the US Insurance business.



2014 31 Dec 2013

30 Sep 2013

30 Jun 2013

31 Mar 2013

US$m US$m US$m US$m US$m Reported profit before tax ......................................................... 1,712 1,797 1,585 1,700 1,567 Currency translation adjustment ............................................... 2 11 49 (8) Acquisitions, disposals and dilutions ........................................ (5) (313) (4) (14) 88 Underlying profit before tax ..................................................... 1,707 1,486 1,592 1,735 1,647

% % % % % Cost efficiency ratio .................................................................. 64.3 64.9 65.9 62.5 64.6 Reported pre-tax RoRWA (annualised) .................................... 3.0 3.0 2.6 2.7 2.4

Reconciliation of reported and underlying Principal RBWM profit before tax


2014 31 Dec 2013

30 Sep 2013

30 Jun 2013

31 Mar 2013

US$m US$m US$m US$m US$m Reported profit before tax ......................................................... 1,762 1,865 1,483 1,614 1,887 Currency translation adjustment ............................................... 2 11 49 (8) Acquisitions, disposals and dilutions ........................................ (5) (313) (4) (14) (32) Underlying profit before tax ..................................................... 1,757 1,554 1,490 1,649 1,847



20

Commercial Banking


2014 31 Dec 2013

30 Sep 2013

30 Jun 2013

31 Mar 2013



3,985 3,930 3,933 Loan impairment charges and other credit risk provisions ........ (197) (543) (681) (802) (358) Net operating income .............................................................. 3,813 3,974 3,304 3,128 3,575 Total operating expenses ........................................................... (1,739) (1,878) (1,834) (1,611) (1,726) Operating profit ...................................................................... 2,074 2,096 1,470 1,517 1,849




2014 31 Dec 2013

30 Sep 2013

30 Jun 2013

31 Mar 2013

US$m US$m US$m US$m US$m Reported profit before tax ......................................................... 2,420 2,426 1,882 1,946 2,187 Currency translation adjustment ............................................... (5) – 25 (13) Acquisitions, disposals and dilutions ........................................ (7) (486) (11) (21) (21) Underlying profit before tax ..................................................... 2,413 1,935 1,871 1,950 2,153


Management view of revenue


2014 31 Dec 2013

30 Sep 2013

30 Jun 2013

31 Mar 2013

US$m US$m US$m US$m US$m Global Trade and Receivables Finance1 .................................... 686 713 757 746 713 Credit and lending .................................................................... 1,494 1,541 1,554 1,520 1,488 Payments and Cash Management1, current accounts and

savings deposits .................................................................... 1,322 1,363

1,345 1,304 1,275 Other ......................................................................................... 508 900 329 360 457 Net operating income2 .............................................................. 4,010 4,517 3,985 3,930 3,933

1 ‘Global Trade and Receivables Finance’ and ‘Payments and Cash Management’ include revenue attributable to foreign exchange products.

2 Net operating income before loan impairment charges and other credit risk provisions, also referred to as revenue.



21

Global Banking and Markets


2014 31 Dec 2013

30 Sep 2013

30 Jun 2013

31 Mar 2013



4,220 4,846 5,816 Loan impairment (charges)/recoveries and other credit risk

provisions ............................................................................. (3) 85

(118) (219) 45 Net operating income .............................................................. 5,157 4,379 4,102 4,627 5,861 Total operating expenses ........................................................... (2,397) (2,585) (2,368) (2,619) (2,388) Operating profit ...................................................................... 2,760 1,794 1,734 2,008 3,473


Reconciliation of reported and underlying profit before tax Quarter ended 31 Mar

2014 31 Dec 2013

30 Sep 2013

30 Jun 2013

31 Mar 2013

US$m US$m US$m US$m US$m Reported profit before tax ......................................................... 2,871 1,866 1,852 2,135 3,588 Currency translation adjustment ............................................... (32) (25) (40) (26) Acquisitions, disposals and dilutions ........................................ (5) (324) (69) 10 (19) Underlying profit before tax ..................................................... 2,866 1,510 1,758 2,105 3,543


Management view of total operating income1,2 Quarter ended 31 Mar

2014 31 Dec 2013

30 Sep 2013

30 Jun 2013

31 Mar 2013

US$m US$m US$m US$m US$m Markets ..................................................................................... 2,225 1,290 1,575 1,839 2,231

Credit .................................................................................... 347 154 154 183 305 Rates ..................................................................................... 631 40 507 377 729 Foreign Exchange ................................................................. 803 693 660 962 871 Equities ................................................................................. 444 403 254 317 326

Capital Financing ...................................................................... 997 977 975 988 1,054 Payments and Cash Management ............................................. 444 472 436 439 423 Securities Services .................................................................... 413 407 408 442 405 Global Trade and Receivables Finance ..................................... 187 181 189 191 180 Balance Sheet Management ...................................................... 750 719 711 704 976 Principal Investments ................................................................ 94 165 142 172 33 Debit valuation adjustment ....................................................... 31 (195) (151) (21) 472 Other ......................................................................................... 19 278 (65) 92 42 Net operating income3 .............................................................. 5,160 4,294 4,220 4,846 5,816 By geographical region Europe ........................................................................................ 1,992 1,312 1,432 1,765 2,525 Asia ............................................................................................ 1,883 1,640 1,640 1,765 1,943 Middle East and North Africa ..................................................... 253 202 216 197 212 North America ............................................................................ 678 541 606 746 774 Latin America ............................................................................. 399 654 369 390 402 Intra-HSBC items ....................................................................... (45) (55) (43) (17) (40) Net operating income3 ................................................................ 5,160 4,294 4,220 4,846 5,816

1 The management view of income reflects the management structure of GB&M which has been in place since 12 August 2013. Comparatives have been re-presented for this change.

2 Figures on a reported basis, unless otherwise stated. 3 Net operating income before loan impairment charges and other credit risk provisions, also referred to as ‘revenue’.



22

Global Private Banking


2014 31 Dec 2013

30 Sep 2013

30 Jun 2013

31 Mar 2013


and other credit risk provisions ......................................... 633 630

658 707 444 Loan impairment (charges)/recoveries and other credit risk

provisions ............................................................................. 5 4 (21) (7) (7) Net operating income .............................................................. 638 634 637 700 437 Total operating expenses ........................................................... (441) (537) (657) (469) (566) Operating profit/(loss) ............................................................ 197 97 (20) 231 (129)

Share of profit in associates and joint ventures ......................... 4 4 4 2 4 Profit/(loss) before tax ............................................................ 201 101 (16) 233 (125)

Reconciliation of reported and underlying profit/(loss) before tax Quarter ended 31 Mar

2014 31 Dec 2013

30 Sep 2013

30 Jun 2013

31 Mar 2013

US$m US$m US$m US$m US$m Reported profit/(loss) before tax ............................................... 201 101 (16) 233 (125) Currency translation adjustment ............................................... 1 2 4 1 Acquisitions, disposals and dilution .......................................... – (1) – – – Underlying profit/(loss) before tax ............................................ 201 101 (14) 237 (124)

% % % % % Cost efficiency ratio .................................................................. 69.7 85.2 99.8 66.3 127.5 Reported pre-tax RoRWA (annualised) .................................... 3.6 1.8 (0.3) 4.6 4.3 (2.3)

Client assets1 by geography Quarter ended

31 Mar 2014

31 Dec 2013

30 Sep 2013

30 Jun 2013

31 Mar 2013

US$bn US$bn US$bn US$bn US$bn Europe ........................................................................................ 195 197 205 203 214 Asia ............................................................................................ 109 108 106 104 106 North America ............................................................................ 65 65 65 64 67 Latin America ............................................................................. 12 12 14 15 16 Total ........................................................................................... 381 382 390 386 403

Client assets1


2014 31 Dec 2013

30 Sep 2013

30 Jun 2013

31 Mar 2013

US$bn US$bn US$bn US$bn US$bn Opening balance ......................................................................... 382 390 386 403 398 Net new money ........................................................................... (2) (11) (5) (9) (1) Value change .............................................................................. 3 5 7 (7) 7 Exchange and other ..................................................................... (2) (2) 2 (1) (1) Closing balance ........................................................................... 381 382 390 386 403

1 ‘Client assets’ are translated at the rates of exchange applicable for their respective period-ends, with the effects of currency translation reported separately. The main components of client assets are funds under management, which are not reported on the Group’s balance sheet, and customer deposits, which are reported on the Group’s balance sheet.



23

Other1


2014 31 Dec 2013

30 Sep 2013

30 Jun 2013

31 Mar 2013

US$m US$m US$m US$m US$m Net operating income before loan impairment charges and

other credit risk provisions ................................................ 1,217 492

1,009 1,329 2,821 – of which effect of changes in own credit spread on the

fair value of long-term debt issued ................................... 148 (652) (575) 224 (243) Loan impairment (charges)/recoveries and other credit risk

provisions ............................................................................. 1 – – (39) 39 Net operating income .............................................................. 1,218 492 1,009 1,290 2,860 Total operating expenses ........................................................... (1,639) (2,700) (1,784) (1,673) (1,639) Operating profit/(loss) ............................................................ (421) (2,208) (775) (383) 1,221

Share of profit/(loss) in associates and joint ventures ............... 2 (18) 2 6 (4) Profit/(loss) before tax ............................................................ (419) (2,226) (773) (377) 1,217

Reconciliation of reported and underlying profit/(loss) before tax


2014 31 Dec 2013

30 Sep 2013

30 Jun 2013

31 Mar 2013

US$m US$m US$m US$m US$m Reported profit/(loss) before tax ............................................... (419) (2,226) (773) (377) 1,217 Currency translation adjustment ............................................... (1) (3) (22) (21) Own credit spread ..................................................................... (148) 652 575 (224) 243 Acquisitions, disposals and dilutions ........................................ 1 43 14 – (1,069) Underlying profit/(loss) before tax ............................................ (566) (1,532) (187) (623) 370

1 The main items reported under ‘Other’ are the results of HSBC’s holding company and financing operations, which include net interest earned on free capital held centrally, operating costs incurred by the head office operations in providing stewardship and central management services to HSBC, along with the costs incurred by the Group Service Centres and Shared Service Organisations and associated recoveries. The results also include fines and penalties as part of the settlement of investigations into past inadequate compliance with anti-money laundering and sanctions laws, the UK bank levy and unallocated investment activities, centrally held investment companies, gains arising from the dilution of interests in associates and joint ventures and certain property transactions. In addition, ‘Other’ includes part of the movement in the fair value of long-term debt designated at fair value (the remainder of the Group’s movement on own debt is included in GB&M).



24

Summary information – geographical regions

Europe


2014 31 Dec 2013

30 Sep 2013

30 Jun 2013

31 Mar 2013


and other credit risk provisions ......................................... 5,852 4,628 4,865 5,506 5,968 Loan impairment charges and other credit risk provisions ........ (116) (166) (518) (656) (190) Net operating income .............................................................. 5,736 4,462 4,347 4,850 5,778 Total operating expenses ........................................................... (3,978) (5,361) (4,390) (3,878) (3,984) Operating profit/(loss) ............................................................ 1,758 (899) (43) 972 1,794

Share of profit/(loss) in associates and joint ventures ............... 2 1 (2) 1 1 Profit/(loss) before tax ............................................................ 1,760 (898) (45) 973 1,795



2014 31 Dec 2013

30 Sep 2013

30 Jun 2013

31 Mar 2013

US$m US$m US$m US$m US$m Reported profit/(loss) before tax ............................................... 1,760 (898) (45) 973 1,795 Currency translation adjustment ............................................... 19 38 97 101 Own credit spread ..................................................................... (149) 537 482 (157) 154 Acquisitions, disposals and dilutions ........................................ – – (40) 20 2 Underlying profit/(loss) before tax ............................................ 1,611 (342) 435 933 2,052

% % % % % Cost efficiency ratio .................................................................. 68.0 115.8 90.2 70.4 66.8 Reported pre-tax RoRWA (annualised) .................................... 2.0 (1.2) (0.1) 1.3 2.4

Reconciliation of reported and underlying UK profit/(loss) before tax


2014 31 Dec 2013

30 Sep 2013

30 Jun 2013

31 Mar 2013

US$m US$m US$m US$m US$m Reported profit/(loss) before tax ............................................... 1,358 (1,266) 206 560 1,660 Currency translation adjustment ............................................... 17 39 92 96 Own credit spread ..................................................................... (152) 545 464 (147) 148 Acquisitions, disposals and dilutions ........................................ – – (40) 20 2 Underlying profit/(loss) before tax ............................................ 1,206 (704) 669 525 1,906

Profit/(loss) before tax by global business


2014 31 Dec 2013

30 Sep 2013

30 Jun 2013

31 Mar 2013

US$m US$m US$m US$m US$m Retail Banking and Wealth Management .................................. 515 442 355 556 400 Commercial Banking ................................................................ 746 640 362 541 545 Global Banking and Markets .................................................... 824 37 196 232 1,336 Global Private Banking ............................................................. 98 55 (106) 128 (242) Other ......................................................................................... (423) (2,072) (852) (484) (244) Profit/(loss) before tax .............................................................. 1,760 (898) (45) 973 1,795



25

Asia


2014 31 Dec 2013

30 Sep 2013

30 Jun 2013

31 Mar 2013


and other credit risk provisions ......................................... 5,873 5,416 5,725 5,705 7,586 Loan impairment charges and other credit risk provisions ........ (104) (157) (143) (118) (80) Net operating income .............................................................. 5,769 5,259 5,582 5,587 7,506 Total operating expenses ........................................................... (2,428) (2,617) (2,507) (2,401) (2,411) Operating profit ...................................................................... 3,341 2,642 3,075 3,186 5,095




2014 31 Dec 2013

30 Sep 2013

30 Jun 2013

31 Mar 2013

US$m US$m US$m US$m US$m Reported profit before tax ......................................................... 3,764 2,991 3,600 3,748 5,514 Currency translation adjustment ............................................... (11) (5) (49) (68) Own credit spread ..................................................................... – – 2 (3) 2 Acquisitions, disposals and dilutions ........................................ – 35 4 4 (1,129) Underlying profit before tax ..................................................... 3,764 3,015 3,601 3,700 4,319


Reconciliation of reported and underlying Hong Kong profit before tax


2014 31 Dec 2013

30 Sep 2013

30 Jun 2013

31 Mar 2013

US$m US$m US$m US$m US$m Reported profit before tax ......................................................... 2,107 1,812 2,072 2,047 2,158 Currency translation adjustment ............................................... (1) (3) 2 1 Underlying profit before tax ..................................................... 2,107 1,811 2,069 2,049 2,159



2014 31 Dec 2013

30 Sep 2013

30 Jun 2013

31 Mar 2013

US$m US$m US$m US$m US$m Retail Banking and Wealth Management .................................. 1,156 1,042 1,079 1,059 1,239 Commercial Banking ................................................................ 1,154 979 1,169 1,196 1,114 Global Banking and Markets .................................................... 1,295 1,000 1,069 1,230 1,376 Global Private Banking ............................................................. 70 33 74 85 92 Other ......................................................................................... 89 (63) 209 178 1,693 Profit before tax ........................................................................ 3,764 2,991 3,600 3,748 5,514



26

Middle East and North Africa


2014 31 Dec 2013

30 Sep 2013

30 Jun 2013

31 Mar 2013


and other credit risk provisions ......................................... 652 607

643 621 632 Loan impairment (charges)/recoveries and other credit risk

provisions ............................................................................. 22 48 (53) (15) 62 Net operating income .............................................................. 674 655 590 606 694 Total operating expenses ........................................................... (295) (365) (308) (335) (281) Operating profit ...................................................................... 379 290 282 271 413

Share of profit in associates and joint ventures ......................... 123 116 97 114 111 Profit before tax ...................................................................... 502 406 379 385 524



2014 31 Dec 2013

30 Sep 2013

30 Jun 2013

31 Mar 2013

US$m US$m US$m US$m US$m Reported profit before tax ......................................................... 502 406 379 385 524 Currency translation adjustment ............................................... (1) – 1 (4) Own credit spread ..................................................................... 5 1 2 (2) 3 Underlying profit before tax ..................................................... 507 406 381 384 523




2014 31 Dec 2013

30 Sep 2013

30 Jun 2013

31 Mar 2013

US$m US$m US$m US$m US$m Retail Banking and Wealth Management .................................. 82 19 59 90 90 Commercial Banking ................................................................ 181 164 130 159 192 Global Banking and Markets .................................................... 244 239 219 155 256 Global Private Banking ............................................................. 4 5 4 2 5 Other ......................................................................................... (9) (21) (33) (21) (19) Profit before tax ........................................................................ 502 406 379 385 524



27

North America


2014 31 Dec 2013

30 Sep 2013

30 Jun 2013

31 Mar 2013



2,192 2,336 2,296 Loan impairment charges and other credit risk provisions ........ (173) (238) (263) (249) (447) Net operating income .............................................................. 1,888 1,741 1,929 2,087 1,849 Total operating expenses ........................................................... (1,442) (1,578) (1,562) (1,562) (1,714) Operating profit ...................................................................... 446 163 367 525 135

Share of profit in associates and joint ventures ......................... 3 16 9 1 5 Profit before tax ...................................................................... 449 179 376 526 140



2014 31 Dec 2013

30 Sep 2013

30 Jun 2013

31 Mar 2013

US$m US$m US$m US$m US$m Reported profit before tax ......................................................... 449 179 376 526 140 Currency translation adjustment ............................................... (12) (14) (13) (24) Own credit spread ..................................................................... (4) 114 89 (62) 84 Acquisitions, disposals and dilutions ........................................ – – (17) – 120 Underlying profit before tax ..................................................... 445 281 434 451 320




2014 31 Dec 2013

30 Sep 2013

30 Jun 2013

31 Mar 2013

US$m US$m US$m US$m US$m Retail Banking and Wealth Management .................................. (14) (95) 58 110 (280)

Principal RBWM .................................................................. 36 (27) (44) 24 40 Run-off portfolio1 ................................................................. (50) (68) 102 86 (320)

Commercial Banking ................................................................ 233 244 225 131 186 Global Banking and Markets .................................................... 262 85 150 313 381 Global Private Banking ............................................................. 28 11 14 16 16 Other ......................................................................................... (60) (66) (71) (44) (163) Profit before tax ........................................................................ 449 179 376 526 140

1 31 March 2013 includes the loss on sale and results of the US Insurance business.



28

Latin America


2014 31 Dec 2013

30 Sep 2013

30 Jun 2013

31 Mar 2013



2,296 2,453 2,505 Loan impairment charges and other credit risk provisions ........ (427) (627) (616) (907) (516) Net operating income .............................................................. 1,703 2,687 1,680 1,546 1,989 Total operating expenses ........................................................... (1,393) (1,401) (1,460) (1,541) (1,528) Operating profit ...................................................................... 310 1,286 220 5 461

Share of profit in associates and joint ventures ......................... – – – – – Profit before tax ...................................................................... 310 1,286 220 5 461



2014 31 Dec 2013

30 Sep 2013

30 Jun 2013

31 Mar 2013

US$m US$m US$m US$m US$m Reported profit before tax ......................................................... 310 1,286 220 5 461 Currency translation adjustment ............................................... (30) (34) (20) (72) Acquisitions, disposals and dilutions ........................................ (16) (1,116) (17) (49) (14) Underlying profit/(loss) before tax ............................................ 294 140 169 (64) 375

% % % % % Cost efficiency ratio .................................................................. 65.4 42.3 63.6 62.8 61.0 Reported pre-tax RoRWA (annualised) .................................... 1.4 5.4 0.9 – 1.9



2014 31 Dec 2013

30 Sep 2013

30 Jun 2013

31 Mar 2013

US$m US$m US$m US$m US$m Retail Banking and Wealth Management .................................. (27) 389 34 (115) 118 Commercial Banking ................................................................ 106 399 (4) (81) 150 Global Banking and Markets .................................................... 246 505 218 205 239 Global Private Banking ............................................................. 1 (3) (2) 2 4 Other ......................................................................................... (16) (4) (26) (6) (50) Profit before tax ........................................................................ 310 1,286 220 5 461


Appendix – selected information (continued)

29

Loans and advances to customers by industry sector and by geographical region

Europe Asia

Middle East and North Africa

North America

Latin America

Gross loans and advances to customers

Gross loans by industry sector as a % of total gross loans

US$m US$m US$m US$m US$m US$m % At 31 March 2014 Personal ............................................... 192,554 126,018 6,475 69,746 15,007 409,800 40.0

First lien residential mortgages ........ 141,385 93,175 2,521 58,554 4,244 299,879 29.3 Other personal ................................. 51,169 32,843 3,954 11,192 10,763 109,921 10.7 Corporate and commercial ................... 245,330 211,809 19,296 52,107 31,285 559,827 54.7 Manufacturing ................................. 60,191 32,728 2,506 12,547 13,012 120,984 11.8 International trade and services ....... 76,770 79,031 9,255 12,430 8,306 185,792 18.1 Commercial real estate .................... 30,420 34,830 559 6,157 2,503 74,469 7.3 Other property-related ..................... 8,458 28,625 1,391 8,370 327 47,171 4.6 Government ..................................... 2,591 1,065 1,449 569 1,018 6,692 0.7 Other commercial ............................ 66,900 35,530 4,136 12,034 6,119 124,719 12.2

Financial .............................................. 29,862 10,032 2,580 7,854 1,540 51,868 5.1 Non-bank financial institutions ........ 27,620 9,643 2,579 7,854 1,359 49,055 4.8 Settlement accounts ......................... 2,242 389 1 – 181 2,813 0.3

Asset-backed securities reclassified ..... 2,472 – – 139 – 2,611 0.2 Total gross loans and advances to customers1 ....................................... 470,218 347,859 28,351 129,846 47,832 1,024,106 100.0

At 31 December 2013 Personal ............................................... 192,107 124,529 6,484 72,690 14,918 410,728 40.8

First lien residential mortgages ........ 140,474 92,047 2,451 60,955 3,948 299,875 29.8 Other personal ................................. 51,633 32,482 4,033 11,735 10,970 110,853 11.0 Corporate and commercial ................... 239,116 203,394 19,760 50,306 30,188 542,764 53.8 Manufacturing ................................. 55,920 30,758 3,180 11,778 12,214 113,850 11.3 International trade and services ....... 77,113 79,368 8,629 11,676 8,295 185,081 18.4 Commercial real estate .................... 31,326 34,560 639 5,900 2,421 74,846 7.4 Other property-related ..................... 7,308 27,147 1,333 8,716 328 44,832 4.4 Government ..................................... 3,340 1,021 1,443 498 974 7,276 0.7 Other commercial ............................ 64,109 30,540 4,536 11,738 5,956 116,879 11.6

Financial .............................................. 27,872 10,188 2,532 9,056 1,376 51,024 5.1 Non-bank financial institutions ........ 26,315 9,858 2,532 9,056 1,277 49,038 4.9 Settlement accounts ......................... 1,557 330 – – 99 1,986 0.2

......................................................... Asset-backed securities reclassified ..... 2,578 – – 138 – 2,716 0.3 Total gross loans and advances to

customers1 ....................................... 461,673 338,111 28,776 132,190 46,482 1,007,232 100.0 At 30 June 2013 Personal ............................................... 173,270 120,822 6,377 78,959 15,081 394,509 41.4

First lien residential mortgages ........ 127,434 90,080 2,296 66,277 3,561 289,648 30.4 Other personal ................................. 45,836 30,742 4,081 12,682 11,520 104,861 11.0

Corporate and commercial ................... 211,128 198,075 21,416 48,327 30,451 509,397 53.4 Manufacturing ................................. 46,202 30,244 3,409 9,609 12,128 101,592 10.6 International trade and services ....... 66,317 77,798 9,458 13,082 7,771 174,426 18.3 Commercial real estate .................... 30,764 33,416 898 6,064 2,328 73,470 7.7 Other property-related ..................... 7,403 23,715 1,526 7,725 285 40,654 4.3 Government ..................................... 1,834 3,220 1,664 348 1,431 8,497 0.9 Other commercial ............................ 58,608 29,682 4,461 11,499 6,508 110,758 11.6

Financial .............................................. 26,896 8,931 1,822 7,470 1,364 46,483 4.8 Non-bank financial institutions ........ 25,362 8,171 1,821 7,470 1,273 44,097 4.6 Settlement accounts ......................... 1,534 760 1 – 91 2,386 0.2

Asset-backed securities reclassified ..... 3,319 – – 147 – 3,466 0.4 Total gross loans and advances to

customers1 ....................................... 414,613 327,828 29,615 134,903 46,896 953,855 100.0

1 The table previously included non-trading reverse repurchase agreement, which had been presented as part of ‘Loans and advances to customers’. Consistent with the balance sheet presentation, non-trading reverse repurchase agreements are now reported separately and have been excluded from gross loans and advances. Comparative data have been re-presented to reflect this change. Non-trading reverse repurchase agreements with customers at 31 March 2014 were US$101,396m (31 December 2013: US$88,215m; 30 June 2013: US$31,088m), the majority of which were transacted with non-bank financial institutions; 31 March 2014: US$100,221m (31 December 2013: US$87,157m; 30 June 2013: US$30,680m). These are now included within ‘Reverse repurchase agreements – non-trading’ along with non-trading reverse repurchase agreements with banks.

interim management statement 1q 2014 - hsbc · interim management statement – 1q 2014 (continued)...

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